U.S. Government Intervenes in Whistleblower Suit Involving 504 Loan Program

October 22, 2013 — When businesses tap into federally funded programs with phony claims for reimbursement, they are essentially robbing the American taxpayers. The federal False Claims Act allows conscientious informants to work with the government to redress the problem. Under the qui tam provisions of the Act, tipsters are permitted to bring a lawsuit for the benefit of the government and share in the government’s recovery.

Wyoming False Claims Act Suit Tied to Bank’s Alleged Misstatements to SBA in Loan Certification

The United States Attorney’s Office has intervened in a whistleblower lawsuit filed against Pinnacle Bank (Pinnacle) in federal court in Wyoming. The False Claims Act suit, originally filed in May 2012 by Hospitality Management, Inc., alleges that Pinnacle made false claims to the United States Small Business Administration (SBA) with reference to a loan granted under the SBA’s “504 Loan Program.”

The 504 Loan Program is intended to make long-term financing available to small businesses seeking to acquire major fixed assets. To fund the loan program, the United States government guarantees debentures that are sold to investors. When a borrower defaults, the government must repurchase the debenture that funded the loan, essentially buying back the bad debt. To minimize the government’s risk, participating banks are required to certify the financial condition of the borrower to the SBA before the 504 loan can be approved.

The whistleblower complaint alleges that Pinnacle had provided the Columbine Group, LLC, with a construction loan to develop the AmericInn Lodge and Suites in Laramie, Wyoming, County 10 reports. According to the suit, Pinnacle falsely certified to the SBA that the bank was unaware of adverse changes in Columbine’s finances since the time it had applied for the 504 loan, that Columbine was current on its loan payments to the bank and that Pinnacle had informed the SBA of all material information known by the bank. Columbine, however, ultimately defaulted on its 504 loan, requiring the government to buy back the bad debt, as specified in the 504 loan funding provisions.

False Claims Act Lawsuits Key to Fighting Fraud Against the Government

Whistleblowers with uniquely valuable information need to understand their rights under the False Claims Act prior to notifying the government. With a national whistleblower practice, Waters & Kraus offers skilled representation for conscientious insiders who learn about fraudulent schemes against the government. Email us or call our qui tam lawyers at 855.784.0268 to learn more about how we can advance your interests.

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